Social ties and earnings management

  • Hwang B
  • Kim S
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Abstract

Like governance structure and alliance scope, partner selection may serve to safeguard firms’ intellectual assets in R&D alliances. We categorize potential alliance partners into friends, acquaintances, and strangers, depending on their previous alliance experience. Data on 1,159 R&D alliances indicate that the more radical an alliance’s innovation goals, the more likely it is that partners are friends rather than strangers. However, strangers are preferred to acquaintances, suggesting partner selection preferences are not transitive. Moreover, results suggest that firms use partner selection, governance structure, and alliance scope as substitute mechanisms to protect valuable technological assets from appropriation in R&D alliances.

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Authors

  • Byoung Hyoun Hwang

  • Seoyoung Kim

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